In January 2012 Ma Ying-jeou comfortably won reelection to a second four-year term as president of Taiwan. Running on his record of improved relations with China and the U.S., Ma received 51.6% of the popular vote. His opponent Tsai Ing-wen received 45.63%. Ma’s Nationalist Party, or Kuomintang (KMT), also retained control in the Legislative Yuan (parliament), although it lost 17 seats. Following the election Ma appointed Chen Chun premier, giving him the task of improving Taiwan’s troubled economy, which, officially, grew just 1.13% in 2012. Unemployment remained stubbornly high by Taiwanese standards at 4.33%, and the New Taiwan dollar traded between NT$29 and NT$30 per U.S. dollar through most of the year.

Policy disagreements in Ma’s cabinet added to the economic gloom. Finance Minister Christina Liu resigned in May after KMT legislators balked at her version of a proposed capital-gains tax (a watered-down version was passed in July). Minister of Labour Wang Ju-hsuan resigned in September after the cabinet, citing the poor economic conditions, refused to approve her proposal to raise Taiwan’s minimum wage by 1.42%. Furthermore, the Ma administration’s reputation for clean government suffered a major setback when cabinet secretary Lin Yi-shih was arrested in July and eventually was indicted for allegedly having accepted $2 million in bribes from a businessman in southern Taiwan. On a positive note, writer and cultural critic Lung Ying-tai was named Taiwan’s first minister of culture. She promised to revitalize Taiwan as a centre of a more open version of Chinese culture and to engage with China.

The health of former president Chen Shui-bian was a subject of contention throughout the year and prompted increased international concern over his treatment while he served an 18.5-year sentence for corruption. In October Chen was moved from prison to a hospital and treated for depression. However, the Ministry of Justice repeatedly rejected appeals for a medical furlough on grounds that Chen was being treated the same as other prisoners and did not meet the legal criteria for such a furlough. In November the U.S. seized properties belonging to Chen’s son in New York City and in the U.S. state of Virginia.

Taiwan’s media environment evolved rapidly in 2012, with the National Communications Commission approving the acquisition of cable-television systems by the Want Want Group. The China-based conglomerate and its chairman, Taiwanese businessman Tsai Eng-meng, already owned the China Times, one of Taiwan’s largest daily newspapers, and several television stations. Concerns over the growing influence of major business groups with investments in China also rose after Hong Kong businessman and China critic Jimmy Lai announced that he was withdrawing from Taiwan’s media market and selling his flagship Apple Daily. A consortium that included Tsai quickly made plans to buy the paper, sparking renewed protests over media independence in Taiwan.

China and Taiwan also found common ground in their objections to Japanese control over the disputed Diaoyu (Japanese: Senkaku) Islands just northeast of Taiwan. Both Taiwan and China claimed sovereignty over the small archipelago. President Ma proposed an East China Sea Peace Initiative in August, which reaffirmed Taiwan’s claims over the islands but called on Japan and other claimants to negotiate their differences and establish a code of conduct. In September, however, the Japanese government purchased the islands from their private owners. In protest, a fleet of Taiwanese fishing vessels attempted to enter waters near the islands in an attempt to assert Taiwan’s claim, but they were driven away by Japanese coast-guard vessels.

In August, Taiwan and China signed a long-awaited investment pact intended to provide the many Taiwanese investors in China with mechanisms to resolve business disputes and better protections if disputes occurred. The pact was the latest in a series of economic and financial agreements negotiated between Taiwan and China since 2008 and resulted in China’s again calling for the two sides to initiate talks on political issues. More than 2.1 million Chinese were expected to have visited Taiwan by the end of the year, surpassing the 1.7 million who arrived in 2011.

U.S.-Taiwan relations were dominated by controversy over imports to Taiwan of American beef containing the feed additive ractopamine. Despite public concern in Taiwan over the safety of the additive, the Legislative Yuan, under intense U.S. pressure, passed a bill allowing trace amounts of ractopamine in imported meat. Bilateral relations were boosted significantly, however, when in November Taiwanese citizens became eligible to travel to the U.S. under the latter’s visa-waiver program.

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